Right Now We ‘Grossly Underestimate’ Economic Damage From Climate Change, New Paper Says

http://thinkprogress.org/climate/2014/06/16/3449645/stern-updated-climate-model-economic/


British economist Lord Nicholas Stern

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From there, Stern and Dietz determined that the price of carbon emissions should fall between $32 and $103 per metric ton in 2015, and should then rise to between $82 and $260 per metric ton by 2035.

Stern and Dietz’s updates to the DICE model focused on three areas:

A new model of how economies grow. The old DICE model looks at any point in time, measures the economy’s productive capacity, and then gauges how much climate change will dampen that productivity in that moment. But climate change can also reduce that productive capacity itself. Stronger storms can damage infrastructure; sea level rise can force people to abandon homes, businesses or equipment; and climate damage can channel more investment into repairs and away from creating new capital. Stern and Dietz account for that, and the result is a double hit: at any given moment, the effects of climate change are reducing the economy’s ability to produce wealth, but they’re also but also reducing the economy’s overall capacity to produce wealth at future moments.

Considerations of higher climate sensitivity. Other factors in modeling climate change’s economic effects are what scientists call “tipping points” — moments when global warming kicks off feedback loops in the planetary ecology that cause the effects to speed up. Examples of tipping points include the polar ice melting in a way that result in sudden huge collapses rather than gradual melting; or melting permafrost in the northern hemisphere releasing underground methane that in turn speeds up global warming even more. (They can also include second-order social effects that damage economies: drought and food scarcity kicking off wars or mass refugee movements, for instance.) A lot of research suggests tipping points are a real threat, so climate sensitivity in the models should be high. But the DICE model assumes climate sensitivity is only modest. So Stern and Dietz also included a greater range of climate sensitivity metrics that reach higher.

Considerations of extreme risk. Another key issue in the modeling is how seriously to take unlikely-but-possible cases of extreme damage from unknown and unpredictable changes as the globe heats up. The models that DICE and IPCC rely upon take a relatively simplistic approach to estimating that risk, and thus the appropriate investments to avoid it. So Stern and Dietz took an updated approach to modeling the possibility of those extreme circumstances as well.